VCs Ask Men About the Future and Women About Failure, New Study Finds

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The world of venture capital, from who hands out the money to who receives most of it, skews male. According to research from Crunchbase last year, women make up only 7 percent of partners at top 100 VC firms. And in 2016, women founders received a little more than 2 percent of venture capital funding.

What’s behind these dismal numbers? A new study conducted by researchers from Columbia Business School and University of Pennsylvania’s Wharton School identified that the types of questions that VCs pose to female and male founders differ greatly and impact how much money the founders receive.

The researchers observed the interactions between 140 venture capitalists — 60 percent men and 40 percent women — and 189 entrepreneurs (12 percent of whom were women) during pitch sessions at TechCrunch Disrupt New York. Ultimately, they found that while the companies were similar in the amount of money they sought, the companies with male founders raised five times more than the startups headed by women.

Essentially, while men got questions about their company’s potential for success, women fielded queries about how they would avoid crises and failure. Sixty-seven percent of the questions posed to male founders were, as described by the researchers in Harvard Business Review, “promotion-oriented,” but 66 percent of the questions directed to women founders were “prevention-oriented.”

Where men got questions such as “How do you plan to monetize this?” when it came to sales, women got “How long will it take you to break even?” When looking to the future, men were asked, “What major milestones are you targeting for this year?” while women were asked, “How predictable are you future cash flows?”

Once the entrepreneurs got stuck in that loop, it was hard to get out. Eighty-five percent of the founders responded to the questions in a way that matched the query they received. A prevention question would get a prevention answer.

The founders who got predominantly prevention questions raised an an average of $2.3 million, while the entrepreneurs that got those promotion questions raised an average of $16.8 million.

“By responding in kind to promotion questions, male entrepreneurs reinforce their association with the favorable domain of gains; female entrepreneurs who respond in kind to prevention questions unwittingly penalize their startups by remaining in the realm of losses,” the researchers explained in Harvard Business Review.

With that information in hand, the researchers created another experiment aping the conditions they observed during the pitch sessions, recruiting 194 investors and 106 ordinary people. Thirty percent of the VCs were women, as were 47 percent of the ordinary people. Both groups of the experiment’s investors ended up giving around $30,000 more to founders that gave promotion answers to prevention questions.